Richmond biz in Senate hotseat

A Richmond-based marketing firm is the target of an investigation by the Senate Committee on Commerce, Science, and Transportation into deceptive business practices in the world of e-commerce.

Affinion, with offices near Parham and Broad streets in Henrico, along with two other marketing firms are said to have generated more than $1.4 billion by “misleading” customers into signing up for loyalty program which incur monthly charges on the person’s credit card bill, according to statements made by Senators and witnesses at a hearing held last week in Washington, D.C.

According the investigation, the firms kicked back about $792 million to 88 popular e-commerce sites such as Orbitz, Priceline.com, Buy.com 1-800 Flowers, Continental Airlines, and Fandango, to share credit card information with them. Classmates.com raked in $70 million alone, according to the investigation.

From an article on the hearing by Information Week:

The practice at issue is called post-transaction marketing, which involves the presentation of offers during the online checkout process. When done to deceive, these offers typically appear to be a required part of the checkout process, in order to trick consumers into accepting charges for unwanted products or services.

A particularly pernicious form of post-transaction marketing is known as “preacquired account marketing,” a process by which the third-party marketer acquires a customer’s credit card information from the online merchant where the customer is making a purchase.

Using this tactic, the third-party marketer only needs an e-mail address or a click as purchase authorization. The retailer, in effect, sells the customers’ credit card information because the retailer, as a partner, will get a cut of whatever extra charge the customer can be duped or pushed into accepting.

The investigation is ongoing and the committee is expected to invite the firm’s CEOs to deliver testimony early next year, according to CNET News.

You can watch an archive video of the hearing and read the reports here.